Question about interest when you have a 0% purchase

[dlister70]

I made a purchase with my Rural King visa and selected 6 months of 0% interest.  When the statement came, it just had the normal minimum balance shown, and didn't make any indication of what I would need to pay to avoid interest.  So I called and after getting bounced around to different departments, they told me that I at least needed to pay the balacned down to less than what the 0% interest purchase was.  For the sake of simple numbers, let's say the 0% purchase was $300.  My statement was $400.  So I paid $200 and ended up with a balance remaining of $200 (so lower than the 0% purchase).  

I was charged a little interest (like 50 cents) so I called and asked what amount I needed to pay to avoid interest.  They said that I had to pay it off because they don't itemize the charges between your 0% purchase and any other purchases you made.  So even though I paid more than what my current purchases were, they still charged interest on some of those purchases.  I asked if I lost my grace period as a result of having the financing purchase, and the person I was talking to said she didn't know what I meant by grace period.  I tried to explain that when you make a purchase, you don't pay any interest if you pay it off before the statement due date, and she kept repeating that was only if you paid the statement in full.  I normally do pay in full, but why would I pay in full if I have 6 months of no interest?

I've also got an Amazon Visa and I selected 0% for a big purchase on that card.  When I get the statement, it has a line for "interest saving balance" where if I pay that much, there's no interest.  It's enough to cover my current purchases for the month plus pay a monthly amount on the 0% purchase.  

So basically, if I make a 6 month finance purchase, then I should just stop using the card until the promotional purchase is paid off?  She said that's how it is right now.  If I make more purchases, I'll get interest (which definitely must mean that they cancel the grace period even if she didn't understand what I meant).  

I thought that it seemed very unusual to charge interest in this scenario, but maybe it's more common than I realize because I just haven't had a promotional balance plus new charges on any other card besides the Amazon Visa.  I have 0% on Care Credit, and Home Depot, and Apple cards, but I don't think that I've made other new charges on top of the promotion on those cards. 

Can anyone give me feedback on what happens on other cards if you have a promotional balance?  The rep at Redstone CU (who finance the Rural King card) said that she understood my frustration and she wished that they calculated it differently, but that's just what they do.  I asked her to send me all the disclosures to read again, because I thought that I would have noticed if it said you lost your grace period on any new purchases when you make a 6 month finance purchase, but here we are.

[RSX]

the CC's that have the 6month no interest deals have the following caveats

if you dont pay the FULL amount in under 6 months, they will go back the entire 6 months and charge you that interest

so your best plan for these types of cards is to do the following

1. stage all your payments to ensure the card is paid off in 5.5 months at the max

2. dont use the card for any other daily use - it is basically a 'dead' card for the next 6 months

[Cowboys4Life]

I have a slightly different persepective and it is wholly dependent on how financially savvy and disciplined you are.

When you make a charge at 0% interest for X months (and you can sell me almost anything on 0% interest) I ALWAYS do the math on what the minimum payment is divided by one month less than the interest free period.  I don't want to cut it close and end up paying interest for the entire time because I got a date wrong.  The minimum payment they show you on your statement is the "standard" minimum payment not the one that will pay it off before that interest gets tacked on.  So if the minimum payment I calculate of an interest free purchase is $100/month for 11 months I will likely pay $150 for the first few months to build a buffer should there be unexpected expenses down the road to the final month to pay off interest free one month early.  

I disagree that the card is "dead" until you pay off the interest free purchase most creditors use a FIFO accounting practice for their statements.  That equates to First In First Out.  They use the payment towards any interest owed from the previous statement then apply the rest towards the balance on oldest transactions first.  I was able to confirm this in practice when I used a cash advance on my Cap1 card one time.  I watched how the balances were listed on the statements for 2 months and they paid off that cash advance first before the others since it was the oldest. I used to have a Nebraska Furniture Mart card that I used to buy my new washer/dryer on 18 months interest free.  Somewhere along the way I also used it for some household items and a new modem.  As long as you PIF monthly on the other things you charged in between statements PLUS the minimum on the interest free purchase you would have no problem.  Or you could look at it as if you charged $233 worth of stuff in month 3 and they say your minimum payment is $50 and your 0% payment would be $100 you could simply pay $233 and avoid interest on the new stuff charged.  As long as you carry a zero balance when that interest free period expires you have nothing to worry about but the problem is many consumers aren't disciplined enough to separate the transactions out.  

[TRC_WA]

My Wells Fargo Reflect is 0% on BT's made in first 3 months plus 0% on purchases for 21 months... (18 months + 3 month extension with timely payments)

I'm 7 months in with a $3500 balance on a $6k limit.  It will definitely be paid off by the end of the 21 months but if it weren't I'm assuming there is no rollback of interest charges.

The card will be 100% worthless at the end of the 21 months and the plan is to get a different WF card and roll the limit over from the useless card to the new one.  I did that when I got the Reflect with my Platinum which was also worthless with no perks beyond the initial 0% SUB period.

[RSX]

@TRC_WA   you are correct - BTs are different  - when the time period ends, the outstanding amount starts to accrue interest

i was referring my answer to the Zero Interest for 6/12/18 month deals

these are the ones you have to stay on top of, because they accrue interest from the purchase date - and if you aren't at $0 at the end of the term, then they add ALL of the accrued interest to your card

so your situation is different - and considerably better....

[RSX]

@Cowboys4Life  you are 100% correct - the card does NOT have to be dead

But - in most cases, the math and overhead it takes to keep on top of it and avoid interest, is more than most will do - or even know how to do

so in a situation where you have multiple cards, sometimes it is just better to SD the card until the promotional items have been zeroed out

[dlister70]

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@Cowboys4Life wrote:

  As long as you PIF monthly on the other things you charged in between statements PLUS the minimum on the interest free purchase you would have no problem.  

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This is how I assumed it would work with this card, but that didn't happen.  I only had like $50 of new purchases.  The minimum payment was $25, and my payment was $200.  So I paid off all the new purchases and paid down the promotional balance and still got charged interest.  That seems crazy to me, but they say that's how it works for them.  

[OmarGB9]

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@dlister70 wrote:

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@Cowboys4Life wrote:

  As long as you PIF monthly on the other things you charged in between statements PLUS the minimum on the interest free purchase you would have no problem.  

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This is how I assumed it would work with this card, but that didn't happen.  I only had like $50 of new purchases.  The minimum payment was $25, and my payment was $200.  So I paid off all the new purchases and paid down the promotional balance and still got charged interest.  That seems crazy to me, but they say that's how it works for them.  

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I was going to say, not all lenders operate the way Cap One did. Some do indeed charge interest on new purchases when a 0% BT promo is in effect unless you pay the FULL balance (purchases + BT remaining) by the statement close. They spell that out very clearly. Case in point: My Penfed card. I currently have some balances at 0% for 12 months on it, and it clearly says in the statement/CC disclosures (I forgot where) that to avoid interest on new purchases, you must pay the entire balance in full (new purchases and BTs) by the statement close.

[jenrn123]

In addition to all of the information you've already received, some cards (I'm thinking of my Lowe's card in particular) will allow you to allocate how your payments are paid. This type of card is one where you have to be very careful of the expiration date of the promotional rate so that you don't have to pay ALL of the accumulated interest if not paid in full by the end of the promotional period. On the other hand, when I have done a balance transfer (typically a 3 percent fee for a 0 percent interest for 12 months) if the balance isn't paid in full by the end of the promotional rate term you DO NOT have to pay the accumulated interest, rather, the remaining balance reverts to the card's usual rate. 

[AwsiDooger]

Likewise I despise this practice. It is a disgraceful squeeze play. They try to pretend the 50 cents is nothing. But it's the rewards equivalent of 3% cash back on a $17 purchase. 

One company after another does this. I get fed up with minimum charges on my Barclays card and Citi card, etc. It is the reason I shelve those cards when possible. Several times I've had to remember to remove a small ongoing purchase from the card after signing up for the balance transfer. Otherwise they're going to charge me a ridiculous 50 cents for something like a $4.99 monthly renewal of Peacock.

It is also the reason I appreciate American Express. They don't offer balance transfers but they do have the Plan It 0% period every once in a while. I always take advantage of that for many semi-major purchases of hundreds to low thousands. Those are indeed 0% with no gimmicks like insulting 50 coing grabs, as long as you pay the monthly "Adjusted Balance," which includes the monthly remaining Plan It rate plus the new purchases and is always specified clearly at the top of the online account and statement.

I bet a lot of credit card users don't even know that these minimum charges exist. That's the whole idea. They see their balance not long before the statement cuts. Then they see the final version. It looks familiar so they don't bother to check the fine print details that they just got screwed out of 50 cents.